Reportable tax position FAQs and examples

Frequently asked questions – making RTP disclosures

Follow the links below for common questions relating to:

• Position
• Materiality
• Category A RTPs
• Reporting your RTPs and alternatives to the RTP schedule
• RTP penalty and remission

If you require further clarification, contact us at ReportableTaxPosition@ato.gov.au

Position

How must I disclose an RTP?

When disclosing RTPs, you must outline the:

• relevant facts that explain the RTP, including all circumstances, arrangements and transactions relevant to the position – your explanation must include sufficient detail so that a reasonable person can identify the facts that are important to the position
• position taken on your company income tax return, including relevant authorities and any industry or administrative practices.

You do not need to disclose on the RTP schedule or early disclosure form that you are in receipt of any advice or opinion about the material RTP or the content of any advice or opinion.

The RTP schedule and early disclosure form will allow you to input up to 500 words in the relevant fields; you can attach additional information.

When are similar circumstances, arrangements or transactions treated as a single position?

Similar circumstances, arrangements or transactions are treated as a single position when all of the following apply:

• the facts associated with a number of circumstances, arrangements or transactions are the same or similar for the purposes of the position, or are related to each other in a way that makes it necessary to take them into account together to determine their treatment for tax purposes
• a common conclusion is reached on the tax treatment of those circumstances, arrangements or transactions – that is, there is a common basis for lodgment.

When similar circumstances, arrangements or transactions are treated as a single position, how do I disclose them on the RTP schedule or early disclosure form?

Where you have treated similar circumstances, arrangements or transactions as a single position, you will only need to disclose them on the RTP schedule or early disclosure form once, under a single RTP number.

You should state in the Concise description field that you have treated similar circumstances, arrangements, or transactions as a single position.

Is the research and development tax offset claim treated as a single position?

Broadly, a research and development (R&D) tax offset claim can be made up of a number of R&D projects and a number of positions on a range of aspects of the R&D incentive. These positions impact on the final amount included on the income tax return – for example, whether the:

• entity is an eligible R&D entity
• expenditure included in the claim was incurred
• expenditure was at risk for R&D purposes
• feedstock provisions have any application.

An R&D tax offset claim reflected on the tax return may not be a single position, instead there may be a number of positions taken within the R&D tax offset claim. Each of these positions must be considered separately to work out whether you have any material RTPs that you must disclose on the RTP schedule or early disclosure form.

However, even if you have a number of projects which make up your R&D tax offset claim, this does not necessarily mean that each project is treated as a separate position.

How are R&D feedstock provisions treated?

An R&D entity may decide not to apply the R&D feedstock provisions to certain expenditure incurred in an R&D project. If this decision on the application of the feedstock provisions was also adopted across a range of different R&D projects of the entity, then a single position will exist when all of the following apply:

• the facts associated with the projects – that is, the circumstances, arrangements or transactions – are the same or similar for the purposes of the position, or are related to each other in a way that it makes it necessary to take them into account together to determine their treatment for tax purposes
• a common conclusion is reached on the tax treatment of those projects – that is, there is a common basis for lodgment.

Where the above factors are not satisfied, then these circumstances, arrangements or transactions are not treated as a single position.

Are arrangements subject to transfer pricing rules treated as a single position?

Circumstances, arrangements or transactions that are subject to transfer pricing rules are treated as a single position when all of the following apply:

• the facts associated with the circumstances, arrangements or transactions are the same or similar for the purposes of the position, or are related to each other in a way that it makes it necessary to take them into account together to determine their treatment for tax purposes
• a common conclusion is reached on the tax treatment of those circumstances, arrangements or transactions – that is, there is a common basis for lodgment.

You cannot use Division 13 of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) or Division 815 of the Income Tax Assessment Act 1997 (ITAA 1997) as the sole common basis for lodgment. You must outline each of your basis for lodgment, having regard to all relevant authorities.

Do I have to disclose positions in relation to tax losses?

Prior-year losses deducted or applied

A position includes statements made in your company income tax return that you have deducted prior-year tax losses or applied prior-year unapplied net capital losses to reduce the net capital gain included in your assessable income.

Only material positions must be disclosed. For example, a Category A RTP will be material where the potential adjustment, should the position not be sustained, is equal to or exceeds your materiality amount.

You must also consider whether you have a material Category B RTP that must be disclosed.

Prior-year losses carried forward

A statement made in your company income tax return that you have carried forward prior-year tax losses or prior-year net capital losses to later income years should not give rise to a potential adjustment – in this instance, the position is not material and is not required to be disclosed.

Current year loss position

Material positions can arise when you are in a loss year. You can have a potential adjustment but no change to your income tax liability for that income year.

You must consider whether you have material positions that must be disclosed when you are in a loss year.

Do I have to disclose positions the ATO knows about?

You are required to disclose all material RTPs, even if you think we already know about the position. The only exclusions are where:

• you have already applied to us for a private ruling that covers the RTP
• you have already disclosed the position on an early disclosure form in accordance with our guidelines
• the RTP is covered by an APA or an application for an APA that has been accepted into our APA program.

When completing the ‘Basis for position’ field, is it sufficient to refer to a division or subdivision of an Act?

You are required to provide an outline of the position taken on your income tax return, including relevant authorities such as relevant legislative provisions that apply to the position in the Basis for position field (either on the RTP schedule or the early disclosure form).

You should outline all relevant authorities you had regard to when concluding the likelihood of the position. Do not refer to a division or subdivision of an Act – you must outline the specific legislative references within that division or subdivision.

Materiality

Can amounts relating to prior years be excluded for the purposes of calculating my materiality amount?

You calculate your materiality amount in the manner set out in the Guide to reportable tax positions for the income year you are lodging your reportable tax position schedule.

You calculate your Australian current tax expense in accordance with accounting principles for the income year that you are lodging your reportable tax position schedule.

Does my materiality amount apply to Category C disclosures

No. You have to disclose your participation in arrangements covered by Category C even if the tax affected by those arrangements falls below your materiality amount.

Category A RTPs

Do I have to disclose a material position that is reasonably arguable?

A matter is reasonably arguable if it satisfies the requirements of section 284-15 of Schedule 1 to the Taxation Administration Act 1953 (as amended) (TAA). This is different to the definition of a Category A RTP.

A position that is reasonably arguable may still need to be disclosed on the RTP schedule as a Category A position. This is because Category A covers positions where, having exercised reasonable care and concluded in the circumstances, having regard to relevant authorities, that:

• What is argued for is more likely to be incorrect than correct (these positions are not reasonably arguable).
• What is argued for is about as likely to be correct as incorrect (these positions are reasonably arguable, but must still be disclosed as Category A RTPs).

RTP Category A does not cover positions where, having exercised reasonable care and concluded in the circumstances, having regard to relevant authorities, that what is argued for is more likely to be correct than incorrect. This type of position is also reasonably arguable.

You must also disclose a material position that does not have regard to relevant authorities or, if there are none, that is not based on a well-reasoned construction of the applicable statutory provision. You must disclose such a material position, even if it is based on administrative or industry practice.

Do relevant authorities include anticipated legislation?

To work out whether a material position is a Category A RTP, you must have regard to relevant authorities. For the purposes of the RTP schedule and early disclosure form, the phrase ‘relevant authorities’ takes its meaning from MT 2008/2 Shortfall penalties: administrative penalty for taking a position that is not reasonably arguable.

As outlined in MT 2008/2, the following are relevant authorities:

• a taxation law
• material for the purposes of subsection 15AB(1) of the Acts Interpretation Act 1901
• a decision of a court (whether or not an Australian court), the Administrative Appeals Tribunal or a Taxation Board of Review
• a public ruling (defined in section 358–5 of Schedule 1 to the TAA).

Relevant authorities do not include announced but un-enacted law changes.

If you do rely upon anticipated legislation, you must determine whether the position you have taken is a material RTP that must be disclosed on the RTP schedule or early disclosure form.

Do I have to disclose a position that is not in accordance with a public ruling?

The reasonably arguable standard is an objective standard. All authorities relevant to the tax treatment of circumstances, arrangements or transactions, including the authorities contrary to the treatment, must be taken into consideration.

You must disclose a material position that is not in accordance with a public ruling where it would be concluded in the circumstances, having regard to relevant authorities, that what is argued for is about as likely to be correct as incorrect, or is less likely to be correct than incorrect.

Refer to MT 2008/2 Shortfall penalties: administrative penalty for taking a position that is not reasonably arguable for the meaning of:

• 'about as likely to be correct as incorrect'
• 'more likely to be correct than incorrect'
• 'relevant authorities'.

You must take reasonable care in forming your view. In determining whether you have exercised reasonable care, refer to MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard.

Do I have to disclose positions in relation to the exercise of a Commissioner’s discretion, such as the application of anti-avoidance rules?

In concluding whether a position involving an assumption about the way in which the Commissioner of Taxation will exercise a discretion, including the application of integrity and anti-avoidance provisions, you should have regard to:

• PS LA 2005/24 Application of General Anti-Avoidance Rules
• subsection 284–15(2) of Schedule 1 to the TAA
• the Revised Explanatory Memorandum to A New Tax System (Tax Administration) Bill (No 2) 2000 at paragraph 1.29.

Where an assumption about the exercise of the Commissioner's discretion forms part of a material Category A RTP, you must disclose the relevant legislative provision that relates to that discretion or anti avoidance provision in the ‘Basis for position’ field for that position.

What do I do if the law is clear but the facts are uncertain?

A position means your basis for lodgment in your company income tax return in respect of particular circumstances, arrangements or transactions.

Your basis for lodgment of your income tax return is the effect for taxation purposes given to particular circumstances, arrangements or transactions reflected on your income tax return. This includes positions involving findings of fact, such as market valuations.

Disclosure of a position is required where a material position involving findings of fact is about as likely to be correct as incorrect, or is less likely to be correct than incorrect.

In determining whether a material position involving market values is about as likely to be correct as incorrect, or is less likely to be correct than incorrect, consider Market valuation for tax purposes, which provides guidance in determining such things as the appropriate valuation methodology, documentation and allocations among assets.

Do I have to disclose positions taken that I consider comply with a general administrative practice?

You must have regard to relevant authorities in concluding what is argued for is about as likely to be correct as incorrect, or is less likely to be correct than incorrect.

For the purposes of the RTP schedule and early disclosure form, relevant authorities do not include our general administrative practices or industry practices.

Disclosure is required if a material position falls within any RTP category, even where you conclude that the position conforms to our general administrative practice.

You are required to include any industry or administrative practices that you have relied on in the Basis for position field.

Reporting your RTPs and alternatives to the RTP schedule

When do I have to lodge the RTP schedule?

The RTP schedule must be lodged by the due date for lodgment of your company tax return.

Can I lodge more than one reportable tax position early disclosure form in relation to an income year?

You can lodge as many reportable tax position early disclosure forms as you require for an income year, as long as the forms are received by us at least 28 days before the date that you must lodge your RTP schedule.

If I withdraw my private ruling application that covers an RTP, do I have to disclose it again?

Where you have withdrawn your application for a private ruling, the application for the ruling no longer exists. If the position is material and falls within any of the three categories of RTP, you must disclose it in the RTP schedule or the early disclosure form.

Do I amend my early disclosure form if new information becomes available after it is lodged?

If you want to make additional disclosures, you can lodge another early disclosure form as long as the form is received by us at least 28 days before you are required to lodge the RTP schedule.

If new information arises and relates to an RTP you have previously disclosed on an early disclosure form, you can lodge another early disclosure form detailing changes to that RTP as long as the form is received by us at least 28 days before you are required to lodge the RTP schedule. In the 'Concise description' field, refer to the RTP number used on the earlier form (for example, E2017-x number) and detail the changes.

Where you do not lodge another early disclosure form detailing the changes, you must disclose the RTP on the RTP schedule. In the 'Concise description' field, you should refer to the RTP number used on the early disclosure form – for example, E2017-x number – and detail the changes.

Are there alternatives?

Taxpayers under an Annual Compliance Arrangement

Where you have entered into an Annual Compliance Arrangement (ACA) with us for the relevant income year, and as part of the ACA you agreed to provide full and true disclosure and ongoing dialogue of all material tax matters including any positions that fall within any RTP category in accordance with this RTP guide, you are not required to lodge on your RTP schedule.

Taxpayers under an Advance Pricing Arrangement.

You are not required to disclose on the RTP schedule any RTP that is covered by an Advance Pricing Arrangement (APA) with us or an application for an APA that has been accepted into the APA program. All other RTPs must be disclosed on your RTP schedule.

RTP penalty and remission

Can disclosures in the RTP schedule constitute a voluntary disclosure?

A statement made in the RTP schedule is not a voluntary disclosure for the purposes of section 284-225 of Schedule 1 to the TAA.

The RTP schedule is part of the income tax return and must be lodged if you are required to do so. Completing and lodging the RTP schedule, as per the schedule instructions, does not satisfy the ‘voluntarily tell’ requirements.

To make a voluntary disclosure you must voluntarily tell the Commissioner about a shortfall amount, a scheme shortfall amount or the false or misleading nature of a statement. That is, the disclosure must be about a statement that has already been made.

See also:

• Miscellaneous Taxation Ruling MT 2012/3 Administrative penalties: voluntary disclosures

Can remission of penalties apply where disclosures were made in the RTP schedule?

Remission is not given for simply filling in the RTP schedule in accordance with the schedule instructions.

A remission of the shortfall penalty for not having a reasonably arguable position or for making a false or misleading statement may be given in certain circumstances where the Commissioner can identify and calculate the shortfall amount based on the information provided in the RTP schedule.

Examples – disclosing RTPs on the schedule or early disclosure form

The following examples will help you complete your RTP Schedule and RTP early disclosure form.